Stocks end lower, despite gains in banks, oil

Trump's election win sends buyers looking for riskier investments

Published 10:03 pm, Wednesday, November 30, 2016

New York

Stocks moved mostly lower Wednesday as gains in blue-chip energy companies and banks were not enough to make up for losses in the broader market.

The bond market took heavy losses, with the 10-year U.S. Treasury note rising to its highest level in a year and a half. The higher yields sent bond substitutes like utilities, telecommunications and real estate stocks sharply lower.

Oil stocks climbed after OPEC nations, which collectively produce more than one-third of the world's oil, agreed to trim production for the first time in eight years.

The Standard & Poor's 500 index lost 5.85 points, or 0.3 percent, to 2,198.81 and the Nasdaq composite dropped 56.24 points, or 1.1 points, to 5,323.68.

The 30-member Dow Jones industrial average closed up 1.98 points, or 0.01 percent, to 19,123.58. The gain was attributable to big increases in a handful of Dow components, mainly Goldman Sachs, Chevron and DuPont.

The bond and energy markets saw the most drama on Wednesday. Bond prices fell sharply yet again and the 10-year note's yield rose to 2.38 percent from 2.29 percent on Tuesday, a major move for that market. That yield is now trading at its highest level since July 2015.

The election of Donald Trump as the country's next president has sent investors fleeing out of safe-play assets like bonds, gold and dividend-paying stocks this month and into riskier investments like small companies, which would benefit most from a growing domestic economy.

The Russell 2000 index, which is made up of mostly small to mid-sized companies, soared 11 percent in November. That's the biggest one-month gain for that index in five years.

Investors believe Trump's promises to cut taxes, invest heavily in infrastructure, and cut regulation will help grow the economy and even cause inflation, which has been almost nonexistent since the financial crisis. U.S. government bonds quickly become less appealing to investors in a healthy, growing economy and in an inflationary environment.

"We have elected a pro-growth president who is going to move very quickly to make some drastic changes, and investors are trying to figure out what to do with that," said Tom di Galoma, head of Treasury trading at Seaport Global Holdings.

Di Galoma said he sees the 10-year note's yield hitting 3 percent by year end, a level not seen in nearly three years.

OPEC members finalized a deal that will cut their oil output by 1.2 million barrels a day starting in January. Preliminary terms of the deal were announced in September. It's the first time in eight years that the cartel has agreed to cut production. Russia, another major oil-producing country that is not part of OPEC, also agreed to cut its output.

The price of U.S. crude surged $4.21, or 9.3 percent, to close at $49.44 a barrel in New York. That's the biggest one-day gain since February. Brent crude, the international benchmark, gained $4.09, or 8.8 percent, to $50.47 a barrel in London.